Chem M&A activity falls in Q2 amid economic concerns: consultant

01 August 2013 18:43[Source: ICIS news]

HOUSTON (ICIS)--Merger and acquisition (M&A) activity in the chemicals industry fell to its lowest level in five years in the second quarter of 2013, reflecting continued concerns over the global economy and “a constrained supply of assets for sale”, consultants PricewaterhouseCoopers (PwC) said in report on Thursday.

PwC said that the three months ended 30 June saw 16 chemicals transactions worth $50m (€38m) or more, totalling $2.8bn, compared with 35 transactions with a total value of $11.1bn in the second quarter of 2012.

The year-on-year decrease in both deal value and volume can be attributed to the lack of larger deals, including an absence of mega deals worth more than $1bn, PwC said.

The average deal size decreased to $175m in the second quarter of 2013, compared with $317m in the same period in 2012. ?xml:namespace>

Asia had six local-market deals valued at $50m or more in the second quarter, leading in M&A activity geographically, PwC said.

However, China is seeing a moderation in its growth trajectory, affected by a weak global economy that limits exports and results in sluggish demand in the region, according to the consultancy. In particular, China’s manufacturing sector is weakening because of lower US and European orders, as well as tighter access to credit, it added.

“The global economic slowdown continues to suppress deal activity in the chemicals industry, and risk-averse acquirers have a limited supply of quality assets to choose from,” said Anthony Scamuffa, US chemicals leader for PwC.

“The US economy is one of the few advanced nations seeing economic growth, faring somewhat better than many other markets,” Scamuffa said.

“In fact, increased residential construction spending combined with decline in unemployment and improved consumer confidence formed a positive back-drop for the six local-market chemicals deals in the US during the second quarter,” he added.

“Growth in end-use markets is key to driving chemical demand, and while there is no strong likelihood for short-term improvement, there are expectations for renewed M&A activity over the longer-term,” Scamuffa said.

“Automotive sales are continuing to grow globally, with auto sales in the US expected to increase by 7.6% this year, benefitting producers of automotive parts and accessories,” he said.

Meanwhile, PwC is predicting continued growth in the construction sector. That growth should “provide more promising opportunities” for M&A activity in the chemical industry as well, Scamuffa said.